Markets never go in a straight line but if you know what to look for they can show clear trends that are a fairly reliable guide and sometimes a particular pattern on a chart can give investors a strong signal about what might be about to come next. Purists will call this kind of chart reading Technical Analysis, but I think that term misses the core element of why TA has value to me – it’s the underlying Psychology of markets and the self-reinforcing nature of patterns in charts that is the reason why I think it works.
On Friday last week the Spot Gold price made a new Record High in US Dollars, closing at $2,073.25 – which is news worthy in itself but when you take a look at the Chart of the Gold price there is a couple of very definitive patterns that suggests it’s about to go a lot higher from here. Check out the 15 Year Gold Chart below :-
You can see that in the wake of the Global Financial Crisis when the US Government started a very aggressive Quantative Easing (Money Printing) policy the Gold Price went through the roof. It calmed down a bit after 2011 but took off again in 2020 when similarly the US Government (and indeed many governments around the world) shut down their economies and started handing out Stimulus Checks to everyone (In other words – More Money Printing). Gold responded predictably in both these circumstances setting new Record Highs. But what have we seen since then?
The Gold Price went on to test the Record High of 2020 in 2022 and again in early 2023. Both of these times the high of 2020 was effective Resistance but now we are in late 2023 and that Resistance level has been tested again….and been broken. There is an old saying that says "Resistance Becomes Support" and if that adage holds true here it means we won’t be seeing Gold below about $2,050 US any time soon (if ever). The chart shows a distinctive multi-year Quadruple Top, which is pretty rare and Technical Analysts all over the world will be seeing this new high as an incredibly Bullish Signal.
On top of that the Gold Chart is also showing a second distinctive pattern called the Cup and Handle which is also considered to be very Bullish. Maybe it’s a trap, but I have often found that the Markets will tell Truth when the Talking Heads on TV lie. The odds of an Interest Rate Cut in the US are getting higher and earlier every day so maybe the Market is telling us that it’s not going to be a Soft Landing for the US Economy like the pundits are saying and we should expect more Stimulus like we saw Post-GFC and during Covid. With a US Presidential Election coming in the next year I certainly wouldn’t be betting against the Money Printer being fired up again in 2024….
DISCLAIMER – This is not Financial Advice
